ITM102 – Assignment 1 (10%)
Read the following case and answer the questions below:
- Briefly describe Alta’s business strategy? How is Information Technology used to support Alta’s
business strategy? What exactly are they trying to accomplish with these IT-based initiatives (hint:
operational excellence; enhanced decision making … etc.)? Explain your answer. [10 points] - Identify three information systems that are described in the case and used by Alta. Categorize each
system according to its purpose and intended users (i.e., TPS, MIS, DSS, ESS)? What type(s) of
decision does each system support? What are the main inputs, processing, and outputs of each
system? [10 points] - Describe the three most important components of Alta’s IT infrastructure (e.g., hardware; software,
networking … etc.) that you believe are the most essential for their operations. Describe how these
infrastructure components support Alta’s initiatives? Why is selecting the right infrastructure
components an important decision for Alta? [10 points] - Identify two types of generic Business Intelligence tools or types of analyses that Alta can use (not a
specific software brand)? What are the advantages of using them and the challenges associated with
that use? [10 points]
Instructions:
● The submission should not exceed two pages single-spaced (excluding cover page, references/works
cited page).
● Please number your answers.
● Answers will be graded based on their quality, not length. A superior answer demonstrates a good
understanding of the case and the material covered in the course.
● All answers should be based on the information in the case. There is no need to do outside research.
But if you decide to use outside information (for whatever reason), or when quoting from the case
or elsewhere, you must cite your work using APA style. Academic Integrity in your work is key. No
cut and paste. Using outside tools (such as ChatGPT or Grammarly) for any part of the assignment or
in any capacity is strictly prohibited and will be treated as plagiarism.
● A copy of your submission incorporating the above must be submitted to the Assignment Drop Box
by the due date (check the detailed tutorial schedule on D2L). Email submissions will not be
considered. Late submissions received after the assignment deadline but within 24 hours of the due
date will receive a 25% marks reduction. Submissions received after 24 hours of the due date will be
subject to a 60% marks reduction. Submissions received after 2 days of the due date will receive 0.
2
Alta: Fast Fashion from Savvy Systems
The poor, ship-building town of La Coruña in northern Spain seems an unlikely home to a techcharged innovator in the decidedly ungeeky fashion industry, but that’s where you’ll find “The
Cube,” the gleaming, futuristic central command of the Inditex Corporation, the parent company of
fashion giant, Alta. The blend of technology-enabled strategy that Alta has unleashed seems to break
all of the rules in the fashion industry. The firm shuns advertising and rarely runs sales. Also, in an
industry where nearly every major player outsources manufacturing to low-cost countries, Alta is
highly vertically integrated, keeping huge parts of its production process in-house. These
counterintuitive moves have enabled the firm to increase earnings from $2.43 billion in 2001 to $18.2
billion in 2010. In August 2008, sales edged ahead of Gap, making Inditex (the parent company of
Alta) the world’s largest fashion retailer.
Data Gathering:
Most fashion retailers place orders for a seasonal collection months before these lines make an
appearance in stores. While overseas contract manufacturers may require long lead times, trying to
guess what customers want months in advance is a tricky business. In retail there’s a saying:
inventory equals death. But how do you make sure stores carry the kinds of things customers want to
buy? Try asking them. Alta’s store managers lead the intelligence-gathering effort that ultimately
determines what ends up on each store’s racks. Armed with handheld personal digital
assistants (PDAs) to gather customer input, staff regularly talks to customers to gain feedback on
what they’d like to see more of. An Alta manager might casually ask, “Would you like it in a
different color?” “What if this V-neck blouse was available in a round neck?” Managers are
motivated because they have skin in the game. The firm is keen to reward success – as much as 70
percent of salaries can come from commissions.
Another level of data gathering starts as soon as the doors close. Then the staff turns into a sort of
investigation unit in the forensics of trendspotting, looking for evidence in the piles of unsold items
that customers tried on but didn’t buy.
PDAs are also linked to the store’s point-of-sale (POS) system – a system that captures customer
purchase information – showing how garments rank by sales. Using these two systems, managers can
quickly and regularly send updates that combine the hard data captured at the cash register with
insights on what customers would like to see. All this valuable data allows the firm to plan styles and
issue rebuy orders based on feedback rather than hunches and guesswork.
Creating Designs:
Rather than create trends by pushing new lines via catwalk fashion shows, Alta designs follow
evidence of customer demand. Data on what sells and what customers want to see goes directly to
their headquarters in La Coruña, Spain, where teams of some three hundred designers crank out an
astonishing thirty thousand items a year, versus two to four thousand items offered up at big chains
like H&M and Gap.
In the fickle world of fashion, even seemingly well-targeted designs could go out of favor in the
months it takes to get plans to contract manufacturers, tool up production, then ship items to
warehouses and eventually to retail locations. But getting locally targeted designs quickly onto store
3
shelves is where Alta really excels. In one telling example, when Madonna played a set of concerts in
Spain, teenage girls arrived to the final show sporting an Alta knockoff of the outfit she wore during
her first performance. The average time for an Alta concept to go from idea to appearance in store is
fifteen days, versus their rivals who receive new styles once or twice a season. Smaller tweaks arrive
even faster. If enough customers come in and ask for a round neck instead of a V-neck, a new version
can be in stores in just ten days. To put that in perspective, Alta is twelve times faster than Gap
despite offering roughly ten times more unique products!
Production and Delivery:
The firm is able to be so responsive through a combination of vertical integration and technologybased coordination of suppliers, just-in-time manufacturing, and finely tuned logistics. Vertical
integration is when a single firm owns several layers in its value chain. While H&M has nine
hundred suppliers and no factories, nearly 60 percent of Alta’s merchandise is produced in-house,
with an eye on leveraging technology in those areas that speed up complex tasks, lower cycle time,
and reduce error. Inventory optimization models help the firm determine how many of which items
in which sizes should be delivered to each specific store during twice-weekly shipments, ensuring
that each store is stocked with just what it needs.
Ceiling-mounted racks and customized sorting machines whisk items from factories to staging areas
for each store. Clothes are ironed in advance and packed on hangers, with security and price tags
attached. This system means that instead of wrestling with inventory during busy periods, employees
in Alta stores simply move items from shipping boxes to store racks, spending most of their time on
value-added functions like helping customers find what they want. Efforts like this help store staff
regain as much as three hours in prime selling time.
Trucks serve destinations that can be reached overnight, while chartered cargo flights serve farther
destinations within forty-eight hours. The firm recently tweaked its shipping models through Air
France–KLM Cargo and Emirates Air so flights can coordinate outbound shipment of all Inditex
brands with return legs loaded with raw materials and half-finished clothes items from locations
outside of Spain.
Competitive Advantage:
Here’s another interesting thing about Alta. Given the sophistication and level of technology
integration within the firm’s business processes, you’d think they would far outspend rivals on
technology. On the contrary, Alta’s IT expenditure is less than one-fourth the fashion industry
average. Alta excels by targeting technology investment at the points in its value chain where it will
have the most significant impact, making sure that every dollar spent on IT has a payoff.
The ultimate goal for a strategist is to craft a sustainable competitive advantage that is difficult for
competitors to replicate. And for nearly two decades Alta has delivered the goods. But that’s not to
say the firm is done facing challenges. For instance, consider the limitations of Alta’s Spain-centric,
just-in-time manufacturing model. By moving all of the firm’s deliveries through just two locations,
both in Spain, the firm remains hostage to anything that could create a disruption in the region, or
even currency fluctuations. Rising transportation costs are another concern. If fuel costs rise, the
twice-weekly deliveries become more expensive to maintain.
4
Rivals have studied the Alta recipe, and while none have attained their efficiency, many are trying to
learn from the master. There is precedent for contract firms closing the cycle time gap with vertically
integrated competitors that own their own factories. Dell (a firm that builds its own PCs while nearly
all its competitors use contract labor) has seen its manufacturing advantage from vertical integration
fall as the partners that supply rivals have mimicked its techniques and have become far more
efficient. In terms of the number of new models offered, clothing is actually more complex than
computing, suggesting that Alta’s value chain may be more difficult to copy.
